U.S. Employment Data Doubts: Rate Cuts May Trigger Inflation, Significant Mispricing in the Market

On August 8, an analyst pointed out that the current market pricing of the U.S. interest rate is severely deviated from the Fed's stance, indicating that a mispricing may be brewing. The analyst stated that Trump is calling for a 3% rate cut from the Fed, and given that the July employment report shows a significant slowdown in the U.S. job market, Trump seems to have the upper hand in this "struggle" with Powell, but attention should be paid to the real reasons behind the slowdown in the job market.

The analyst stated that the weakness in the job market usually comes from a decrease in labor demand, but that is not the case now. The reason is that new jobs are not driven by demand for workers, but rather by the number of workers available for hire (labor supply). Worse, lowering interest rates will exacerbate the imbalance between labor demand and supply, thereby reigniting inflation without boosting job growth. Thus, this would be a policy mistake.

It is essential to distinguish between the data before and after revision. The initial release of most economic data is based on incomplete information, which is a trade-off made in pursuit of timeliness. Therefore, the more we hope for timely data releases, the lower its accuracy will be. Once the data is sufficiently revised to include a complete set of information, it becomes more accurate. Thus, rather than saying that the initially released data is "manipulated", it is more accurate to say that it is "inaccurate" due to incomplete information. Looking at the revised and more accurate total U.S. employment data, the situation is clear and consistent: the upward trend in employment is primarily attributed to an increase in labor supply, while the recent weakness in new jobs is due to a slowdown in labor supply growth, not due to a decrease in labor utilization (i.e., an increase in unemployment rate). All of this will lead to a significant mispricing in the U.S. interest rate market.

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UncommonNPCvip
· 13h ago
It's funny, inflation is coming again.
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BearMarketSagevip
· 13h ago
This policy is really clever.
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NewDAOdreamervip
· 13h ago
Be careful when playing with this market.
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Web3ExplorerLinvip
· 13h ago
hmm... seems like we're seeing a game theory paradox in the labor market rn. supply-side economics hits different when you understand the cross-chain dynamics of employment *adjusts academic glasses*
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